UP cigarette traders demand 'rationalisation' of VAT

Cigarette traders in Uttar Pradesh on Wednesday urged the state government to do away with the Value Added Tax (VAT) on cigarettes from 50 per cent and bring it at par with the neighbouring states.

The traders claimed that high VAT differential was encouraging smuggling of cigarettes in UP , thus, resulting in loss of tax revenue to the state exchequer.

In July 2012, the Akhilesh Yadav-led state government had hiked VAT on cigarette from 17.5 per cent to 50 per cent, purportedly as a deterrent to smokers.

Addressing a news conference here, UP Cigarette Vyapar Sangh president Shyam Mohan Agarwal claimed that while cigarette consumption had not gone down after VAT hike, there had been spurt in smuggling and use of cheaper/counterfeit brands.

“Due to smuggling from neighbouring states and even Nepal in UP, the state government is losing its tax revenue to other states,” he added.

VAT on cigarette in neighbouring states comprising Delhi, Uttarakhand, Haryana, Himachal Pradesh, Madhya Pradesh, Bihar, Jharkhand and Chhattisgarh range 20-23 per cent. Agarwal said following the hike in VAT, illicit cigarette units operating in the state had ramped up their capacity to meet the demand for cheaper and counterfeit brands.

He informed that the Sangh had already met senior commercial tax officials and even solicited a meeting with the chief minister in this regard.

“Due to tax differential, the trade is slowly going in the hands of smugglers and unscrupulous traders in UP with no real reduction in cigarette consumption,” he said.